Clear criteria: Prabowo acknowledges his supporters at a Jakarta event. The president’s budget cuts may be ineffective or even counterproductive, some analysts caution, pointing out that they do not target specific projects based on audits. — Bloomberg
JAKARTA: President Prabowo Subianto’s top adviser Hashim Djojohadikusumo says this year’s budget cuts are not a one-time measure but part of a continued effort throughout the administration’s tenure.
Hashim, a tycoon and Prabowo’s brother, said the administration aims to save at least around US$20bil each year over the course of the next five years.
This year, the government made cuts to ministerial and agency budgets to save a similar amount to support some priority programmes.
“Our state budget will continue to grow, but all leakages and silly programmes will be removed continuously,” he said at the CNBC Economic Outlook 2025 event.
“This approach will allow us to free up US$20bil every year, accumulating US$100bil in equity over five years.”
According to Hashim, these funds will be partially funnelled into Danantara, Indonesia’s newly established sovereign wealth fund, which is hoped to raise the country’s economic growth from 5.03% last year to 8% by 2029.
The wealth fund, which will manage total assets of around US$900bil from all state-owned enterprises, is set to focus on a wide range of strategic sectors.
These range from the downstream nickel, bauxite and copper industries to artificial intelligence data centres, oil refineries, petrochemicals, food production, aquaculture and renewable energy.
“If we could secure foreign investors to coinvest on equal terms with Danantara, our US$20bil fund could double to US$40bil.
“And if we apply three times leverage, we’re getting US$120bil in available funds every year,” he said. “That’s why I’m optimistic.”
Some analysts cautioned that the budget cuts, which target specific components within all ministry budgets rather than specific projects based on audits, may be ineffective or even counterproductive.
The policy has already sparked confusion among government agencies, some of which have responded by cutting contract workers and scholarships.
The administration insisted that this was not the intended outcome, attributing these actions to misinterpretations of the regulation.
The budget cuts have also impacted the Public Works Ministry, which saw its allotment decline from 111 trillion rupiah to over 50 trillion rupiah.
This forced the ministry to scale back several projects, including new irrigation systems and dams needed to support Prabowo’s priority programmes.
Yose Rizal Damuri, executive director of the Centre for Strategic and International Studies, said the need for government efficiency through spending cuts was understandable.
However, he pointed out that there were no clear criteria for determining which parts of the budget should be trimmed.
At the same time, he noted that the government’s expanded bureaucracy with new ministries and programmes added to financial pressure.
“This paradox creates more confusion, both within the government and across the economy.
“It also makes it harder for the market to respond.
“This kind of confusion could undermine all targets of the current administration,” Yose said. — The Jakarta Post/ANN
